U.S. crude supply fall surprises; oil reclaims $94

EIA reports supply fall; OPEC confirms cut in Saudi output

V.Phani Kumar

SAN FRANCISCO (MarketWatch) — An unexpected fall in the past week’s U.S. crude inventories helped oil-futures prices settle higher Wednesday, as OPEC left its 2013 global oil demand growth estimate unchanged and confirmed a significant production cut by Saudi Arabia last month.

Light, sweet crude-oil futures for delivery in February
US:CLG3
climbed 96 cents, or 1%, to settle at $94.24 a barrel on the New York Mercantile Exchange. Prices, which lost 86 cents on Tuesday, had been trading around $93.52 before the latest supply data.

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The U.S. Energy Information Administration reported on Wednesday a 1 million-barrel decline in crude supplies for the week ended Jan. 11. Analysts polled by Platts expected a 2.5 million-barrel climb.

Motor gasoline supplies rose 1.9 million barrels, while distillate stocks added 1.7 million barrels, the EIA report said. Analysts had forecast a rise of 3 million barrels for gasoline inventories and a climb of 1.6 million barrels in distillate supplies, which include heating oil.

February heating oil
US:HOG3
closed down 1 cent, or 0.4%, at $3 a gallon, while February gasoline
US:RBG3
tacked on 1.5 cents, or 0.6%, to $2.72 a gallon.

“Even though we have seen so much news this year of a widening crude oil supply, crude has still found a way to rally,” said analysts at Lido Isle Advisors, in a note Wednesday. “We don’t see major fundamentals in place for a continued monster rally but at the same time, from a trader’s standpoint, crude looks to be climbing a wall of worry,” they said, adding that the next key resistance level is at $95.

OPEC update

In its monthly report, the Organization of the Petroleum Exporting Countries, or OPEC, on Wednesday said it expects world oil demand to grow by 800,000 barrels a day in 2013, matching the level estimated in its December forecast. See: OPEC world oil demand growth forecast unchanged.

Reuters

OPEC headquarters

The oil-producing cartel also confirmed that Saudi Arabia reduced its daily oil production in December to 9 million barrels, down from 9.5 million a month earlier — marking the largest monthly cut in nearly three years. See: OPEC confirms Saudi Arabia cut oil output in Dec.

OPEC sees demand for 2013 unchanged but some members say that “demand is not in good shape,” said Tariq Zahir, managing member at Tyche Capital Advisors. “With the [U.S.] debt crisis staring a us directly in the face and other countries like Japan [recently announcing a stimulus package], there are definitely several countries that are facing fiscal challenges in the near term.”

“We feel with demand very weak [and] even though we are seeing production cuts by OPEC, the production by the U.S. will offset the cuts, he said, and Wednesday’s gains in the energy market is likely to be short lived.

In London, Brent crude
UK:LCOG3
settled at $110.61 a barrel on ICE Futures, up 31 cents.

Prices likely got an added boost from tension in Algeria.

Islamist militants from Mali attacked a natural-gas field in Algeria operated in part by BP PLC
BP, -1.83%
kidnapping at least eight people and killing a security guard, the Associated Press reported Wednesday.

On Nymex, natural-gas futures eased back after posting gains over the past four sessions in a row. February natural gas fell 2 cents, or 0.6%, to end at $3.44 per million British thermal units.

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